What to Do with Your 401(k) during Market Volatility

Watching your 401(k) account dip during a market downturn can feel like a punch to the gut.

We understand it’s stressful. It’s emotional.

And if you’re like most people, your first instinct might be to hit the panic button.

But here’s the truth: Panicking is the worst thing you can do when it comes to your retirement savings.

Market volatility is a normal part of the investment cycle. Ups and downs happen.

What matters is how you respond to them.

In this article, we’ll walk you through what not to do and what actions may help you stay on track.

Why You Shouldn’t Panic

401(k) During Market Volatility

Market corrections are expected, and we have always recovered relatively soon so we believe longer-term investors should consider corrections an opportunity, as opposed to a reason to panic

Historically the market has recovered from 5-10% corrections in an average of about 3 months. 10-20% corrections have averaged about 8 months.

But that doesn’t make it easier in the moment.

When your 401(k) takes a hit, it’s natural to feel anxious – even fearful.

That emotional response may tempt you to sell off investments or stop contributions altogether.

Don’t.

Panic selling locks in your losses and typically turns a temporary dip into a permanent setback.

And yet, many investors do exactly that.

Instead of reacting emotionally, remind yourself:

Volatility is part of investing.
Historically, the market has always recovered.
Your 401(k) is a long-term plan – not a short-term gamble.

According to Fox Business, “The average recovery time from a 10% downturn has been three months. The average recovery time from a 20% adjustment is eight months. Now, it may not happen this time, but it will certainly recover.”¹

That’s not a long time in the grand scheme of retirement planning.

We believe the real danger isn’t the dip – it’s the decision to abandon your plan because of it.

Take a breath. Reassess. And remember, downturns don’t last forever – but smart planning can.

Stay Focused on the Long Term

401(k) During Market Volatility

When the market dips, it’s tempting to think short-term, especially when you see your 401(k) balance drop.

But the truth is, your retirement savings strategy should be focused on the long game.

401(k)s are designed to grow over time.

Market volatility may feel unsettling in the moment, but it’s just one piece of a much bigger picture.

Selling out of the market or making big changes based on short-term performance can often lead to missed opportunities.

In fact, financial professionals repeatedly stress the importance of time in the market rather than timing the market.

While no one can predict exactly what might happen, missing even a few of the market’s best days may reduce long-term returns.

If you panic and pull out during a downturn, you not only lock in your losses – you also risk missing the rebound.

This is why we feel it’s essential to stick with your strategy and stay focused on long-term goals.

Keep contributing. Keep investing.

And if anything, use this moment to double down on smart habits that support the kind of retirement you actually want.

Don’t Stop Contributions – Consider Buying the Dip

401(k) During Market Volatility

One of the worst mistakes to make during market turbulence?

Pausing your 401(k) contributions.

When stocks drop, they essentially go on sale.

That means every dollar you invest during a downturn buys more shares than it would when prices are high.

Over time, this could lead to stronger growth when the market recovers.

So instead of backing off, consider staying the course — or even increasing contributions if your budget allows.

Especially if you have matching contributions.

This is free money and allows you to buy more shares at lower prices.

This may be a smart time to consider frontloading contributions if you have a bonus, tax return, or extra cash on hand.

Just make sure that accelerating your contributions won’t interfere with any employer match formulas or strain your monthly budget.

If you’re worried about timing, automate your contributions so you stay consistent – regardless of the market’s ups and downs.

The takeaway here?

Don’t freeze. Don’t stop. Keep investing, especially when prices are low.

This is one way long-term investors turn short-term volatility into long-term gains.

Rebalancing (Not Reacting) Is the Right Move

401(k) During Market Volatility

Instead of making emotional decisions when the sky feels like it’s falling, we believe one of the smartest strategies is rebalancing.

Rebalancing is the process of realigning your portfolio back to its original target allocation – like maintaining a 60/40 balance between stocks and bonds.

Over time, certain investments may grow faster and throw off that balance, exposing you to more risk than you originally intended.

For example, let’s say your target was 60% stocks and 40% bonds.

After a long bull market, you might be sitting closer to 80% stocks and only 20% bonds.

That might look good on paper…until the market drops.

Suddenly, you’re much more exposed to losses than you planned for.

Rebalancing helps you avoid that.

It’s not about reacting to headlines—it’s about staying aligned with your risk tolerance and retirement timeline.

It also works in your favor during good markets.

Selling high-performing assets to buy underperformers may feel counterintuitive, but it positions your portfolio to take advantage of the next growth cycle while keeping your overall risk in check.

And as you get closer to retirement, managing risk becomes even more important.

That’s when shifting more of your portfolio into stable investments – like bonds – may help preserve what you’ve worked so hard to save.

Finally, if you’ve experienced a major life change such as a job switch, 401(k) rollover, inheritance, or even just a large sum of money, rebalancing helps you reset and get your money working for your current goals, not your past assumptions.

Rebalancing isn’t about reacting – it’s about protecting.

It’s one of the most powerful yet overlooked moves to make to stay in control of your retirement savings.

Consider Professional Advice

401(k) During Market Volatility

If market volatility has you second-guessing your strategy, or if you’re getting close to retirement, it may be time to bring in a professional.

Professional advice may help you take the emotion out of investing and make decisions based on data, goals, and strategy – not headlines or gut feelings.

Whether you’re unsure how to rebalance your 401(k), not confident you’re saving enough, or just want peace of mind knowing someone is monitoring your account, having a trusted expert in your corner may make all the difference.

401(k) Maneuver provides independent, professional account management to help employees, just like you, grow and protect their 401(k) accounts.

Our goal is to increase your account performance over time, manage downside risk to minimize losses, and reduce fees that are hurting your retirement account performance.

We review and rebalance your account for you with the goal in mind of keeping you in what is working and out of what is not.

With 401(k) Maneuver, you can go about your life doing what you love with confidence, knowing we are managing your 401(k) for you.

See how it works.